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Are Investors Undervaluing American Eagle Outfitters (AEO) Right Now?

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Here at Zacks, we focus on our proven ranking system, which places an emphasis on earnings estimates and estimate revisions, to find winning stocks. But we also understand that investors develop their own strategies, so we are constantly looking at the latest trends in value, growth, and momentum to find strong companies for our readers.

Looking at the history of these trends, perhaps none is more beloved than value investing. This strategy simply looks to identify companies that are being undervalued by the broader market. Value investors rely on traditional forms of analysis on key valuation metrics to find stocks that they believe are undervalued, leaving room for profits.

In addition to the Zacks Rank, investors looking for stocks with specific traits can utilize our Style Scores system. Of course, value investors will be most interested in the system's "Value" category. Stocks with "A" grades for Value and high Zacks Ranks are among the best value stocks available at any given moment.

American Eagle Outfitters (AEO - Free Report) is a stock many investors are watching right now. AEO is currently sporting a Zacks Rank of #1 (Strong Buy), as well as an A grade for Value. The stock is trading with P/E ratio of 12.69 right now. For comparison, its industry sports an average P/E of 14.14. Over the past 52 weeks, AEO's Forward P/E has been as high as 19.09 and as low as 9.32, with a median of 12.59.

Investors will also notice that AEO has a PEG ratio of 0.83. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. AEO's PEG compares to its industry's average PEG of 0.85. Over the past 52 weeks, AEO's PEG has been as high as 3.12 and as low as 0.74, with a median of 1.21.

We should also highlight that AEO has a P/B ratio of 1.96. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. AEO's current P/B looks attractive when compared to its industry's average P/B of 3.43. Over the past year, AEO's P/B has been as high as 2.08 and as low as 1.20, with a median of 1.62.

Finally, our model also underscores that AEO has a P/CF ratio of 7.53. This metric focuses on a firm's operating cash flow and is often used to find stocks that are undervalued based on the strength of their cash outlook. This company's current P/CF looks solid when compared to its industry's average P/CF of 12.62. AEO's P/CF has been as high as 9.96 and as low as 4.61, with a median of 7.63, all within the past year.

Urban Outfitters (URBN - Free Report) may be another strong Retail - Apparel and Shoes stock to add to your shortlist. URBN is a # 1 (Strong Buy) stock with a Value grade of A.

Shares of Urban Outfitters currently holds a Forward P/E ratio of 9.86, and its PEG ratio is 0.42. In comparison, its industry sports average P/E and PEG ratios of 14.14 and 0.85.

URBN's price-to-earnings ratio has been as high as 16.59 and as low as 9.48, with a median of 11.51, while its PEG ratio has been as high as 0.92 and as low as 0.40, with a median of 0.64, all within the past year.

Urban Outfitters sports a P/B ratio of 1.54 as well; this compares to its industry's price-to-book ratio of 3.43. In the past 52 weeks, URBN's P/B has been as high as 1.79, as low as 1.07, with a median of 1.43.

These are only a few of the key metrics included in American Eagle Outfitters and Urban Outfitters strong Value grade, but they help show that the stocks are likely undervalued right now. When factoring in the strength of its earnings outlook, AEO and URBN look like an impressive value stock at the moment.


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